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Share Markets:

The US stockmarket weakened ahead of the US corporate earnings season. The Dow fell 0.4%, the S&P 500 slipped 0.3% and the Nasdaq was down 0.2% for the session, suggesting we could see a soft opening for the Australian stockmarket today.

Bonds:

Bond prices rose (yields fell) following a well received Treasury auction of US$32 billion in three-year notes. This comes ahead of further supply from the Treasury in coming days.

Foreign Exchange:

The Aussie dollar held its ground against the US dollar, with continued strength in iron ore prices supporting the currency. The Yen regained some of its lost ground against the Aussie dollar on profit taking with expectations of monetary easing from the Bank of Japan already priced in.

Commodities:

Commodity prices weakened overnight, led by cocoa and coffee prices.

Australia:

The Australian Industry Group's index of construction activity rose from 37.0 to 38.8 in December. A figure below 50 implies contraction. The national construction industry continues to exhibit substantial weakness, however, the overall rate of contraction eased for a third consecutive month.

November saw Australia's trade deficit widen to $2.6bn, the largest deficit since March 2008. On the imports side, consumption goods continued to grow strongly, up 8.2% in the year to November. Exports next month should benefit from improved volumes and prices but a trade deficit is still expected.

Europe:

Euro zone consumer confidence was little changed at -26.5 in December, from -26.6 in November.
Retail sales rose 0.1% in November, after falling 0.7% in October. For the year to November, Euro zone retail sales have contracted 2.6%.

The Euro zone unemployment rate rose to a record high of 11.8% in November, from 11.7% in October. By country, Spain fared the worst, with its unemployment rate rising to 26.6% and Portugal's unemployment rate held steady at 16.3%, while at the other end of the spectrum, the unemployment rate in Austria was 4.5% in November. Youth unemployment in the region is particularly concerning; in Spain it rose to 56.5% in November.

The Euro zone business climate indicator improved to -1.12 in December, from -1.17 in November. In separate data, economic confidence in the Euro zone improved, rising to 87.0 in December, from 85.7 previously.

German factor orders were softer than expected, falling 1.8% in November, after rising 3.8% in October. For the year to November, however, factory orders are down 1.0%, an improvement from the 2.5% decline in the year to October.

United States:

The US NFIB small business optimism index was slightly stronger than expected, rising to 88.0 in December, but remained close to the three-year low of 87.5 seen in November, as small businesses likely nervously awaited the outcome of the fiscal cliff decision.

The IBD/TIPP economic optimism index rose to 46.5 in January, from 45.1 in December. However, a reading below 50 signals a negative outlook.

Consumer credit rose by a larger than expected at US$16.1bn to US$2,768.5bn in November, after rising by US$14.1bn in October. Most of the rise was in non-revolving credit, which includes auto loans and student loans. Consumer credit rose 7.0% in the year to November.